The UCL Practitioner

Another new Prop. 64 "injury in fact"/reliance decision: McAdams v. Monier, Inc.

Yesterday, in McAdams v. Monier, Inc., ___ Cal.App.4th ___ (May 30, 2007), the Court of Appeal (Third Appellate District) reaffirmed that UCL and CLRA class actions alleging failure to disclose material information are alive and well in California. The Court reversed a trial court order denying class certification of such claims, holding that they may be established through a classwide inference of reliance, and that individualized proof of each class member's actual reliance is not required. The Supreme Court is expected to decide this precise question in In re Tobacco Cases II.

Regarding the CLRA claim, the McAdams court explained:

The court in Massachusetts Mutual concluded ... that th[e] causation requirement under the CLRA did not render the case before it unsuitable for class treatment. Drawing from two state Supreme Court decisions, Vasquez v. Superior Court (1971) 4 Cal.3d 800 (Vasquez) and Occidental Land, Inc. v. Superior Court (1976) 18 Cal.3d 355 (Occidental), Massachusetts Mutual concluded that this causation requirement can be satisfied if the record permits an “inference of common reliance” to the class. (Massachusetts Mutual, supra, 97 Cal.App.4th at pp. 1292-1293.)

Slip op. at 10. After carefully considering Vasquez, Occidental, and Massachusetts Mutual, the Court of Appeal concluded that "[t]he record here permits an inference of common reliance among the CLRA class." Slip op. at 12. "The class action is based on a single, specific, alleged material representation. Monier knew but failed to disclose that its color roof tiles would erode to bare concrete long before the life span of the tiles was up. ... [I]n this context, class treatment is appropriate." Id. at 9.

As for the UCL claim, it was "based on the same material misrepresentation" as the CLRA claim — "Monier's failure to disclose the premature color erosion of the roof tiles" (slip op. at 20) — so the same analysis applied:

The real nub of the issue of UCL class suitability here turns on the element of reliance (causation). As amended by Proposition 64, section 17204 requires, for purposes of standing, that a private plaintiff have “suffered injury in fact and [have] lost money or property as a result of such unfair competition.” Furthermore, it is a basic principle of standing that “‘[t]he definition of a class cannot be so broad as to include individuals who are without standing to maintain the action on their own behalf. Each class member must have standing to bring the suit in his own right.’” (Collins v. Safeway Stores, Inc. (1986) 187 Cal.App.3d 62, 73, quoting McElhaney v. Eli Lilly & Co. (D.S.D. 1982) 93 F.R.D. 875, 878; Feitelberg v. Credit Suisse First Boston, LLC (2005) 134 Cal.App.4th 997, 1018.) As we shall explain, the concept of “inference of common reliance” (as opposed to “actual reliance”) can be applied here to satisfy these two quoted principles of standing, rendering plaintiff’s UCL action suitable for class treatment.

Massachusetts Mutual again points the way. As we discussed in the previous section of this opinion, that decision applied an “inference of common reliance” in determining that a fraud-based class action under the CLRA was suitable for class treatment.

Slip op. at 22-23. The Court of Appeal found no reason why the "inference of reliance" analysis should not apply to both the CLRA claim and the UCL claim for class certification purposes:

Several factors support our conclusion that this standard of “inferred reliance” from the CLRA class context may also be applied to the Proposition 64 UCL class context, instead of requiring a showing of “actual reliance.” The CLRA and the UCL are both consumer protection statutes with traditionally less rigorous proof burdens than common law fraud. (See Civ. Code, § 1760; § 17200; Consumer Advocates v. Echostar Satellite Corp. (2003) 113 Cal.App.4th 1351, 1360; Comment, The California Consumers Legal Remedies Act (1973) 10 Cal. Western L. Rev. 161.) After Proposition 64, the two acts’ language on reliance is similar (i.e., suffer “damage” (CLRA), or “injury in fact” (UCL), “as a result of”). (Civ. Code, § 1780, subd. (a); § 17204.) The two acts are often alleged in the same lawsuit, and a CLRA violation can serve as the “unlawful” prong and furnish the “fraudulent” basis of a UCL action. (See Daugherty, supra, 144 Cal.App.4th at pp. 837-838.) The Proposition 64 amendments on UCL standing at issue here were designed simply to close a “loophole” that allowed private persons to bring UCL actions on behalf of the abstract “general public,” even though no one had been damaged or misled. (Voter Information Pamp., supra, analysis by Legislative Analyst, pp. 38-39; argument in favor of Prop. 64, p. 40; see Californians for Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 232 (Mervyn’s) [Proposition 64 “left entirely unchanged the substantive rules governing business and competitive conduct”].) And if the principle of inferred reliance is sufficient to satisfy the element of reliance/causation as to a CLRA fraud-based class action, in which damages can be awarded, it certainly is sufficient to satisfy that element for a similar UCL class action where the remedies are essentially limited to injunctive and restitutionary relief.

Slip op. at 25-26 (footnote omitted). McAdams is the first opinion that comes anywhere close to acknowledging the holding in Mervyn's that Prop. 64's amendments were "procedural," not substantive. However, any reliance requirement, whether inferred or actual, would be a substantive change to the UCL, not a procedural one. This opinion gamely tries to find a middle ground by holding that reliance on material omissions may be inferred. But any holding that Prop. 64 imports reliance as an element still runs afoul of Mervyn's.

Off-topic post: I met John Edwards today!

I had the pleasure of meeting and shaking hands today with John Edwards, candidate for the Democratic Party's nomination for U.S. President, at a private reception at Levin, Simes, Kaiser & Gornick in San Francisco. He is a very articulate and compelling candidate, and I agreed with pretty much everything he said. As a die-hard Democrat (there, I've said it), I was impressed with him but remain intrigued by Hillary Clinton and Barack Obama. Thanks again to Jim Sturdevant for co-hosting and inviting me to the reception. Meeting someone like Edwards in person is always an interesting and memorable experience.

Supreme Court argument on UCL preemption: Viva! International Voice for Animals v. Adidas Promotional Retail Operations

By now, this morning's oral argument in Viva! International Voice for Animals v. Adidas Promotional Retail Operations, no. S140064, has concluded. In this case, the Supreme Court will address this issue: "Does the doctrine of conflict preemption preclude California from prohibiting importation and trade of wildlife that have been delisted under the federal Endangered Species Act and thus are not currently regulated by federal law?" The underlying action alleged a UCL claim, and the plaintiff's standing post-Prop. 64 was also challenged at the intermediate appellate level. My original posts on this case are here and here. The Court of Appeal's opinion is Viva! Int'l Voice for Animals v. Adidas Promotional Retail Operations, Inc., 134 Cal.App.4th 133 (2005) (First Appellate District, Division One) (review granted).

If you happened to attend this morning's argument and would like to send me a report for posting here, please drop me a line at [email protected].

Blogs by U.C. Davis law professors

The Spring 2007 issue of my law school's alumni magazine, King Hall Counselor, has short piece called "Blogging by UC Davis Law Professors." The piece lists the following blogs:

• ImmigrationProf Blog (Professors Johnson, Chacón, and Hing are editors of this immigration blog that assists professors in their scholarship and teaching.)

• Law School Innovation Blog (Professor Anupam Chander co-edits this blog devoted to the topic of law-school innovators.)

• Professor Anupam Chander's personal blog: chander.com (globalization and digitization through the eyes of a California law professor)

• Underbelly: A Journal of Soft Information (a personal blog by Professor Emeritus John Ayer writing under alias)

• BioLaw (Professor Holly Doremus is an occasional contributor to this blog on law and the life sciences.)

• IntLawGrrls: Voices on International Law, Policy, Practice (Professor Diane Marie Amann is a founder of this new blog by women academics in international law.)

How about a listing of blogs by U.C. Davis Law School alumni? Are there any other law blogs by U.C. Davis grads?

UPDATE: Because an inordinate number of spam comments are somehow attracted to this post, I'm closing comments and trackbacks. If you know of other law blogs by U.C. Davis grads, please send me an email.

Search engine for law blogs: Blawg Search by Justia

There's a relatively new search engine out there just for law blogs: Blawg Search by Justia. This is a good alternative to Google blog search or IceRocket, neither of which is limited to a particular type of blog such as law blogs. I sometimes use Google blog search to find extremely recent commentary on brand new decisions, and Blawg Search should be an even better tool for that. Blawg Search also has an extensive directory of law blogs organized by topic and jurisdiction.

Actually, I have to assume that many of you already know about Blawg Search, because as of today, this blog is listed as Justia's 12th most popular law blog of all time based on "the number of visits to the Blawg from the BlawgSearch search engine and directory listing pages." More of Justia's statistics on top law blogs by day, week, and month, as well as historical data back to October 2006, are available here. I'm not doing too bad for May; last time I checked, my site was the 17th 13th most popular law blog this month. That's pretty good considering that Justia tracks around 2,000 law blogs.

[Via Legal Blog Watch.]

"'Pioneer' a Boost To Plaintiffs"

Yesterday's Daily Journal had another focus article (I believe this makes four) on Pioneer Electronics. The article, by Susan E. Abitanta and Robert J. Drexler Jr. of The Quisenberry Law Firm, begins:

To hear defense counsel spin it, the California Supreme Court's unanimous decision in Pioneer Electronics minimizes all-important privacy rights to meet trivial discovery ends, yet at the same time is so narrow that it makes no difference in existing privacy law. Pioneer Electronics USA Inc. v. Superior Court, 40 Cal.4th 360 (Jan. 25, 2007).

In a similar fashion, the same voices quickly downplayed Sav-On Drug Stores Inc v. Superior Court, 34 Cal.4th 319 (2004), as an inconsequential opinion offering little help to class plaintiffs.

When viewed dispassionately, however, Pioneer greatly aids plaintiffs in class actions, because it improves counsel's access to precertification information from putative class members - witnesses with knowledge of the claims. Pioneer addresses critical discovery issues of whether plaintiffs may receive contact information for putative class members and, if so, what steps should be taken to protect their privacy rights.

CAFA law review article: "The Consumer Class Action Bill of Rights: A Policy and Political Mistake"

The April 2007 issue of the Hastings Law Journal contains an essay by Professor Laurens Walker of the University of Virginia School of Law: "The Consumer Class Action Bill of Rights: A Policy and Political Mistake," 58 Hastings L.J. 849 (2007). Here is the abstract:

This Article discusses the significance of the Consumer Class Action Bill of Rights, found in section 3 of the 2005 Class Action Fairness Act. The author argues that this section is the most significant provision of the law. In addition to expounding upon the notice provision of the Bill of Rights Section, the Article explores the possible responses that public officials could make. Additionally, the author predicts a strong degree of public participation in class action settlements, especially by the Attorneys General of the states. The Article also considers the Act's substantive regulation of settlement terms, including "coupon settlements," as well as general prohibitions on negative settlements and geographic discrimination. The author examines the public and private enforcement models and discusses the comparative efficiency of public versus private enforcement. Lastly, the Article considers the jurisdictional provisions found in sections 4 and 5 of the Class Action Fairness Act, particularly the changes to minimal diversity and the facilitation of removal to federal court.

Using a comparative study of class actions in federal and state court, the author predicts that jurisdictional provisions will result in the litigation of most major class actions in federal court, but with little impact on the outcome of these cases. The author finds that the Bill of Rights view toward public enforcement is a costly policy and political mistake, and a better solution would have been found in providing for more robust private enforcement.

[Via Federal Civil Practice Bulletin]

Thanks for coming!

Thanks to everyone who attended the State Bar's UCL program last Friday in LA. I thought it was a great program and I particularly enjoyed meeting the blog readers who came up and introduced themselves.

New Prop. 64 "injury in fact" opinion: Meyer v. Sprint Spectrum L.P.

In a case sure to be discussed at today's conference (same-day registration available!), the Court of Appeal examined Prop. 64's "injury in fact" language in depth. Meyer v. Sprint Spectrum, L.P., ___ Cal.App.4th ___ (May 16, 2007). The Meyer plaintiffs alleged that "Sprint improperly included certain illegal and unconscionable terms in its customer service agreement. Plaintiffs did not allege Sprint had asserted or threatened to assert those terms against them." Slip op. at 2. The Court of Appeal (Fourth Appellate District, Division Three) held that the plaintiffs lacked standing to assert either a UCL or a CLRA claim.

With respect to the UCL claim, the Court of Appeal determined that the language "'injury in fact' and 'lost money or property as a result of [the alleged] unfair competition'' creates a "two-part, statutory standing test." Id. The entire decision is worth reading, but the following excerpt is of particular interest:

The cases decided since Proposition 64 changed the language of section 17204 have concluded a plaintiff suffers an injury in fact for purposes of standing under the UCL when he or she has:

(1) expended money due to the defendant’s acts of unfair competition (Aron v. U-Haul Co. of California (2006) 143 Cal.App.4th 796, 802-803 [plaintiff alleged he was required to purchase excess fuel when returning rental truck]; Monarch Plumbing Co. v. Ranger Ins. Co. (E.D.Cal., Sept. 25, 2006, No. Civ. S-06-1357) 2006 U.S.Dist. Lexis 68850, *20 [plaintiff alleged he paid higher insurance premiums because of defendant insurer’s settlement policies]; Witriol v. LexisNexis Group (N.D.Cal., Feb. 10, 2006, No. C05?02392) 2006 U.S.Dist. Lexis 26670, *18-19 [plaintiff incurred costs to monitor and repair damage to his credit caused by defendants’ unauthorized release of private information]; Southern California Housing Rights Center v. Los Feliz Towers Homeowners Assn. Bd. (C.D.Cal. 2005) 426 F.Supp.2d 1061, 1069 [housing rights center lost financial resources and diverted staff time investigating case against defendants]; Laster v. T-Mobile USA, Inc. (S.D.Cal. 2005) 407 F.Supp.2d 1181, 1194 [defendants advertised cellular phones as free or substantially discounted when purchased with cellular telephone service, but plaintiffs were required to pay sales tax on the full retail value of the phones]);

(2) lost money or property (Huntingdon Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2005) 129 Cal.App.4th 1228, 1240, 1262 [plaintiff’s home and car were vandalized by animal rights protestors]);

(3) been denied money to which he or she has a cognizable claim (Progressive West Ins. Co. v. Superior Court (2005) 135 Cal.App.4th 263, 269-270, 285, fn. 5 [insurance company paid insured’s medical bills, then sued to recover that money when insured collected damages from the third party who caused his injuries; insured had standing to bring UCL claim against insurance company]; Starr-Gordon v. Massachusetts Mutual Life Ins. Co. (E.D.Cal., Nov. 7, 2006, No. Civ. S-03-68) 2006 U.S.Dist. Lexis 83110, *1, 18-19 [plaintiff challenged the process by which defendant terminated her disability benefits]).

Unlike the plaintiffs in the foregoing cases, plaintiffs here have not suffered any injury in fact. They have not been required to pay any money out of their own pockets (other than the fees they paid for their cellular telephone service), they have not lost money or property, and they have not been denied any money that they can allege is rightfully theirs.

Id. at 6-7.

Rest of the Tobacco amicus briefs

Thanks to my lovely readers, I am now able to provide copies of the last two amicus briefs filed in In re Tobacco II Cases, no. S147345:

• Amicus Curiae Brief of the Civil Justice Association of California (submitted 03/27/07; filed 04/09/07)
  

• Amici Curiae Brief of Curt Schlessinger, Peter LoRe, and the California Law Institute (submitted 04/23/07; filed 05/04/07)
  

A list of all the briefs that I have copies of is available on my Prop. 64 Appellate Briefs page. The parties' time to file their omnibus responses to the amicus briefs has been extended to June 29, 2007.

State Bar's UCL Program this Friday, May 18

I want to encourage everyone to sign up to attend the State Bar's Fifth Annual Unfair Competition Law Program, at which I will be speaking this Friday, May 18, in Los Angeles. For members of the Antitrust and Unfair Competition Law Section, the early registration period (and its discounted registration fee) has been extended through Thursday, May 17. Also, law students may register free of charge.

The program will cover a wide variety of UCL-related topics. The first panel, which I will present along with Will Stern, is called "Section 17200 — The State of the Law Today." We will address the most recent decisional law relating to Prop. 64, the three "prongs," UCL defenses, UCL remedies, and procedural questions surrounding UCL claims. The second panel will examine the impact of the federal Class Action Fairness Act on UCL class actions. The third panel will address whether Prop. 64 imported a "reliance" element into the UCL — an issue that the Supreme Court is expected to decide in the Tobacco case. And finally, the last panel will examine "whether the Consumers Legal Remedies Act will fill the void left by Prop. 64." This should be a very interesting and educational series of panels.

It would be great to meet some of the readers of this blog in person at the event. Please come!

"7th Circuit Launches Federal Judiciary's First Wiki

Monday's National Law Journal reports that "7th Circuit Launches Federal Judiciary's First Wiki." According to the article, the wiki will permit both judges and practitioners to add their comments about appellate practice and procedure within the Seventh Circuit.

Trial-level briefs and order interpreting Fireside Bank: In re Cellphone Termination Fee Cases

Many thanks to the blog reader who brought the following briefs and order to my attention. They were filed in In re Cellphone Termination Fee Cases, Alameda County Superior Court, JCCP no. 4332, and address the impact of Fireside Bank, the one-way intervention decision, on the scheduling of various types of motions:

• Plaintiffs' Supplemental Case Management Conference Statement (filed 04/20/07)
  

• Defendants' Supplemental Memorandum of Points and Authorities Regarding Fireside Bank v. Superior Court (filed 04/20/07)
  

• Order on Effect of Fireside Bank on Scheduling of Motions of (1) AWS for Summary Judgment (2) Plaintiffs for MJOP and (3) Plaintiffs for Class Certification (filed 04/25/07) (Hon. Bonnie Sabraw)

Supreme Court sets "no class action" arbitration case for argument: Gentry v. Superior Court

In its oral argument calendar issued last week, the Supreme Court set Gentry v. Superior Court (Circuit City Stores, Inc.), no. S147345, for argument on Tuesday, June 5, 2007 at 2:00 p.m. in Los Angeles. Gentry presents the following issue:

This case presents issues regarding the enforceability of an arbitration provision that prohibits employee class actions in litigation concerning alleged violations of California's wage and hour laws.

Please let me know if you're planning to attend the argument and would like to write up a report for posting here. POST-ARGUMENT UPDATE: Multiple reports on the argument have come in. See this post and the comments to this post.

Supreme Court sets two UCL preemption cases for oral argument: Prachasaisoradej and In re Tobacco Cases II

Last week, the Supreme Court set two UCL preemption cases for oral argument on Wednesday, June 6, 2007 at 9:00 a.m. in Los Angeles:

S128576 Prachasaisoradej v. Ralph’s Grocery Company, Inc.: "Does an employee bonus plan based on a profit figure that is reduced by a store's expenses, including the cost of workers compensation insurance and cash and inventory losses, violate (a) Business and Professions Code section 17200, (b) Labor Code sections 221, 400 through 410, or 3751, or (c) California Code of Regulations, title 8, section 11070?"

S129522 In re Tobacco Cases II: "Does the Federal Cigarette Labeling and Advertising Act (15 U.S.C. sections 1331 et seq.) preempt claims under the Unfair Competition Law (Bus. & Prof. Code, sections 17200 et seq.) for advertising that allegedly targeted minors?" This case is not to be confused with the other Supreme Court case called In re Tobacco Cases II, no. S147345, in which Prop. 64's "injury in fact" language will be construed.

In addition, a third UCL preemption case will be heard on Tuesday, May 29, 2007 at 9:00 a.m. in San Francisco:

S140064 Viva! International Voice for Animals et al. v. Adidas Promotional Retail Operations et al.: "Does the doctrine of conflict preemption preclude California from prohibiting importation and trade of wildlife that have been delisted under the federal Endangered Species Act and thus are not currently regulated by federal law?" The Court of Apppeal held that federal law preempted the plaintiff's UCL claim, which formed the basis for the suit. Prop. 64 retroactivity and associational standing were also raised at the intermediate appellate level.

"Leveling the Playing Field"

On Friday, May 4, 2007, the Daily Journal had another focus article on Pioneer Electronics. The article, "Leveling the Playing Field" (subscription) by H. Scott Leviant of Arias, Ozzello & Gignac, LLP, responds to recent defense-oriented articles on the decision. An excerpt:

Based on the rapid appearance of conflicting analyses, the Supreme Court decision in Pioneer Electronics (USA) Inc. v. Superior Court (Olmstead), 40 Cal.4th 360 (2007), likely will have significant consequences in class actions. See, e.g., Gordon E. Bosserman, "Too Much Information?" Daily Journal, March 19, 2007; Steven B. Katz, "Class-Action Dissonance," Daily Journal, March 5, 2007; Kimberly Kralowec, "Thoughts on the Class-Action Aspects of Pioneer Electronics," UCL Practitioner (www.uclpractitioner.com /2007/01/thoughts_on_the.html), Jan. 25, 2007.

The articles by Bosserman and Katz, in particular, suggest, in their attempts to downplay the significance of Pioneer Electronics, that the defense bar is rightly concerned about the long-term consequences of this decision on class defendants.

....

Defense-oriented commentators have seized on the facts of Pioneer Electronics as a basis for advocating that its application should be limited. In particular, commentators have suggested that the basis for the Supreme Court's decision turns uniquely on the fact that the complaining consumers in Pioneer Electronics "consented" to the disclosure of their personal contact information by their act of complaining.

However, the strength of the Pioneer Electronics decision does not support this limited construction. Its significance is greater than the sum of its facts.

A fairer construction of Pioneer Electronics is that, through this decision, the Supreme Court has provided clarification and guidance about the propriety of access by plaintiffs to potential class members. In providing that guidance, the Supreme Court reaffirmed and strengthened important principles which hold that discovery of contact information for potential class members is presumptively appropriate.

Still more Tobacco amicus briefs

Many thanks to the blog readers who sent copies of the following additional amicus briefs in In re Tobacco II Cases, no. S147345:

• Amicus Curiae Brief of the Foundation for Taxpayer and Consumer Rights (submitted 03/26/07; filed 04/09/07)
  

• Amicus Curiae Brief of Consumers Union of United States, Inc. (submitted 04/13/07; filed 04/19/07)
  

• Amici Curiae Brief of Farmers Insurance Exchange and Granite State Insurance Exchange (submitted 04/23/07; filed 05/04/07)
  

• Amici Curiae Brief of Verisign, Inc. and AT&T Mobility LLC (submitted 04/24/07; filed 05/04/07)

A list of all the briefs that I have copies of is available on my Prop. 64 Appellate Briefs page. The only briefs of which I haven't posted copies were filed by the Civil Justice Association of California and by Curtis Schlessinger, Peter LoRe and the California Law Institute.

The Supreme Court has granted all outstanding requests for leave to file amicus briefs. The parties' consolidated responses to all amicus briefs are due on June 4, 2007 (pursuant to extensions of time granted mid-April).

New Cel-Tech "safe harbor" decision: Fladeboe v. American Isuzu Motors, Inc.

In Fladeboe v. American Isuzu Motors, Inc., ___ Cal.App.4th ___ (Apr. 23, 2007) (modified Apr. 24, 2007), cross-complainant American Isuzu Motors, Inc. prevailed at trial on its individual UCL claim against a company that fraudulently posed as an authorized Isuzu dealership. The UCL claim was tried to the judge, while a jury separately found the defendant liable for fraud and negligent misrepresentation. The jury awarded $114,642.87 in damages, and the judge awarded $214,300 in restitution. Judgment was entered for "a total of $214,300 in damages and restitution." Slip op. at 8-10. (Given the facts of this case, that result sounds right, but damages and restitution do not always overlap as they did here. In some cases, the two sums would be added together.)

On appeal, the defendant raised a Cel-Tech "safe harbor" argument. The Court of Appeal (Fourth Appellate District, Division Three) rejected it:

[Cross-defendant] Fladeboe AG argues Vehicle Code section 11713.3, subdivision (d) and Corporations Code section 2010, subdivision (a) gave it a “safe harbor” for its conduct. In Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 184, the California Supreme Court concluded “a plaintiff may not bring an action under the unfair competition law if some other provision bars it.” This statutory safe harbor must “actually bar” the action, and not “merely fail to allow it.” (Ibid.) “Acts that the Legislature has determined to be lawful may not form the basis for an action under the unfair competition law, but acts may, if otherwise unfair, be challenged under the unfair competition law even if the Legislature failed to proscribe them in some other provision.” (Id. at p. 183.)

Fladeboe AG argues Vehicle Code section 11713.3, subdivision (d) provided it a safe harbor by permitting a motor vehicle dealer to transfer its dealership, subject to the manufacturer’s consent. “[I]t is evident,” Fladeboe AG argues, “that attempts to consummate a transfer do not have the quality of wrongfulness that [Business and Professions Code] section 17200 was designed to redress.” But Isuzu did not assert, and the trial court did not find, wrongful conduct based on the attempt to transfer RFLM’s Isuzu dealership. The trial court found Fladeboe AG engaged in wrongful conduct by fraudulently representing itself as an authorized Isuzu dealer—both to the public and to Isuzu—without obtaining Isuzu’s consent and without the requisite form .... Vehicle Code section 11713.3 does not provide a safe harbor for such conduct; to the contrary, subdivision (f)(1) of section 11713.1 prohibits it.

Slip op. at 29-30.

"Legal Wikis Are Bound to Wow You"

Law.com has an interesting article on legal wikis, complete with links to several successful examples. The article, dated May 7, 2007, is by Robert Ambrogi.

Supreme Court grants review in another "no class action" arbitration clause case: Firchow v. Citibank

On April 26, 2007, the Supreme Court issued a "grant and hold" order in another "no class action" arbitration clause case, Firchow v. Citibank (South Dakota), N.A., no. S150386. The Court of Appeal opinion in that case was unpublished; my original post is here. Briefing has been deferred pending resolution of Gentry v. Superior Court, no. S141502.

Supreme Court transfers final Prop. 64 retroactivity case: Benson v. Kwikset Corp.

On April 23, 2007, the Supreme Court issued a transfer order in the last remaining Prop. 64 retroactivity "grant and hold" case, Benson v. Kwikset Corp., no. S132443. I previously pointed out that this case was overlooked when the other "grant and hold" cases were transferred in March.

New UCL class certification decision: Seastrom v. Neways, Inc.

In Seastrom v. Neways, Inc., ___ Cal.App.4th ___ (Apr. 23, 2007), the Court of Appeal (Fourth Appellate District, Division One) addressed the "adequacy" element of class certification. The two proposed plaintiffs (who were substituted into the case after the original plaintiff lost standing in the wake of Prop. 64) were participants in a pyramid scheme. That scheme sold "an anti-aging dietary supplement" called BioGevity. One ingredient in BioGevity is federally regulated and is supposed to be sold only with a prescription. Slip op. at 2-4.

The Court of Appeal determined that the trial court did not abuse its discretion in holding that the two plaintiffs, who profited from selling the dietary supplement, were not adequate representatives of a proposed class of persons who bought the dietary supplement. Their conflict of interest, the court held, "goes to the very subject matter of the litigation." Id. at 6-7 (quoting Richmond v. Dart Industries, Inc., 29 Cal.3d 462, 470 (1981)). It seems to me that if someone who sold a product in violation of the UCL wished to facilitate a class action to recitify that misconduct, what they should do is notify their customers of the violation and encourage them to retain counsel. The Court of Appeal declined to address whether leave to amend the complaint to add another plaintiff should be granted. Id. at 11 n.2.

This case reminds me of Yoo v. Jho, ___ Cal.App.4th ___ (Feb. 23, 2007), in which the Court of Appeal (Second Appellate District, Division Three) held that two manufacturers of counterfeit designer bags could not bring their contract dispute into the court system and expect equitable relief. What were they thinking?

New Fifth Circuit CAFA case: Preston v. Tenet Healthsystems Memorial Medical Center, Inc.

In Preston v. Tenet Healthsystems Memorial Medical Center, Inc., ___ F.3d ___ (5th Cir. Apr. 25, 2007), the Fifth Circuit examined the term "citizen" for purposes of CAFA's "home state" and "local controversy" exceptions: "The underlying facts of this lawsuit and the reason for the parties contesting the citizenship issue emanate from a common origin of circumstances: the unmerciful devastation caused by Hurricane Katrina." Slip op. at 18.

The Fifth Circuit talked at length about the kinds of evidence that can be used to prove citizenship for CAFA purposes. It then affirmed the district court's remand order:

We recognize that Congress crafted CAFA to exclude only a narrow category of truly localized controversies, and the exceptions provide a statutory vehicle for the district courts to ferret out the “controversy that uniquely affects a particular locality to the exclusion of all others.” Evans [v. Walter Indust., Inc.], 449 F.3d [1159,] 1164 [(11th Cir. 1996)]. This particular Hurricane Katrina case symbolizes a quintessential example of Congress’ intent to carve-out exceptions to CAFA’s expansive grant of federal jurisdiction when our courts confront a truly localized controversy. Based on the medical records, affidavits, and attending factual circumstances, we determine that the district court did not clearly err in finding that one-third of the class members were citizens of Louisiana at the time of filing suit. Accordingly, we affirm the district court’s judgment.

Id. at 30. (Via Decision of the Day.)

Blogosphere commentary on Fireside Bank

In addition to my own preliminary thoughts on Fireside Bank (the one-way intervention case), more blogosphere commentary can be found at Wage Law by Michael Walsh (who has two separate posts on the case), Cal Biz Lit (Bruce Nye), and Legal Pad (Mike McKee).

The opinion is open to varying interpretations, some of which are reflected in these blog posts. To be completely candid, I don't think the Supreme Court realized all of the potential implications of some of the language it used in the opinion. In retrospect, this may have been due to a lack of amicus participation. I think it may turn out to be very difficult, for example, to determine exactly what types of pre-class-certification motions implicate the "one way intervention" problem. For example, what if the plaintiff files a putative class action then immediately seeks a TRO followed by a motion for a preliminary injunction? To issue a preliminary injunction, the trial court has to find a likelihood of success on the merits. This is sufficiently related to the merits of the action that no one may peremptorily challenge the judge later under Code of Civil Procedure section 170.6. After Fireside Bank, can the defendant prevent a plaintiff from obtaining a preliminary injunction on pain of losing the right to seek class certification later?

Thoughts are welcome. And, readers, please keep me apprised of trial-level cases in which the judges are asked to address Fireside Bank. We may just have to wait and see how these issues play out in the lower courts.

UPDATE: In response to my hypothetical, a reader wrote in with the following analysis:

Re: your question about whether a trial court is able to issue a TRO in a class action before the class is certified: See CCP § 527(b), which provides that “a temporary restraining order or a preliminary injunction, or both, may be granted in a class action,… whether or not the class has been certified.” Apparently this was the legislative reaction to the ruling in Clemons v. Western Camera Photo Hut (1981) 117 Cal.App.3d 392, which held that issuance of a preliminary injunction did constitute one-way intervention. This issue is discussed in the Court of Appeal’s now-vacated Fireside opinion, 35 Cal.Rptr.3d 80, 93, fn 10:

In Clemons v. Western Photo Camera Hut (1981) 117 Cal.App.3d 392, 172 Cal.Rptr. 782, the same court that decided Home Savings embraced the argument the Supreme Court refused to reach in Pacific Land, supra, 20 Cal.3d 10, 141 Cal.Rptr. 20, 569 P.2d 125: That because a motion for preliminary injunction requires a showing that the plaintiff is likely to succeed on the merits, the trial court is powerless to grant such a motion if the complaint includes class allegations and no class has yet been certified. More precisely, the court held that the trial court there had acted within its discretion by denying a preliminary injunction on the basis of Home Savings. (Id. at pp. 395-396, 172 Cal.Rptr. 782.) Under this holding, if a defendant were spewing toxic waste into a shared reservoir and a class action were filed on behalf of the reservoir's users, the trial court would act within its discretion by refusing to grant a preliminary injunction solely because to do so might forecast to class members the ultimate outcome of the case. It is hardly a surprise that the Legislature promptly overturned this holding by amending the governing statute to permit preliminary injunctions in class actions “upon the same grounds as in other actions, whether or not the class has been certified.” (1982 Stats., ch. 812, § 1, p. 3101; see now Code Civ. Proc., § 527, subd. (b).)

Thank you; that's very helpful.